Stock prices for kiosk company Outerwall are down more than 20% in post-market trading after it lowered its financial projections for the year noting in a release that promotion discounts in July and August “drove consumers toward more single night [DVD] rentals.” As a result, the net revenue per rental in Q3 likely will fall as much as 9 cents vs last year. The company, formerly known as Coinstar, also says that it may see 6.5M fewer rentals than it expected in Q4 “as the number of titles has shifted to either later in the fourth quarter or into 2014.” The number of shifts “is greater than normal.” The Redbox owner had high hopes for Q3: Last year the company struggled to compete with the Summer Olympics, and the number of customers is up 5% in the first half of 2013 vs the period last year. Indeed, CEO J. Scott Di Valerio says that “both rentals and revenue for Redbox increased significantly in July and August” — even though they ultimately “were not to our expectations.” He vows to cut the number of consumer promotions, reduce content and operating costs, and repurchase an additional $100M of Outerwall shares in Q4. The company dropped the top of its Q3 revenue projection, made in July, by 6.5% to $589M with earnings per share down 37.8% to a maximum of 94 cents. For the full year, revenues are now projected as high as $2.34B, -5.5% from the previous estimate, with core diluted EPS as high as $5.12, -18.2%.

10 Comments

Maybe more people are using their smartTVs. I know we are. It’s so much easier to just click a button on your remote than to get a disk and have to return it. I’m afraid the days of browsing the aisles in the video store or even browsing the RedBox digital aisles are numbered. Not enough variety in the content. No way to fit 40,000 titles in that little box.

CC • on Sep 16, 2013 2:07 pm

The selection at REDBOX is terrible. Have stopped using and use Netflix exclusively now.

NM • on Sep 16, 2013 2:07 pm

Not too surprised — Redbox runs DVDs several months after the theatrical run. For most of the summer, only the January-March releases were there, which is the season that studios put garbage movies out to die.

I’d look at correlations with DVD sales over the same period. Hollywood may have raked in theatrical sales over the summer, but I bet their DVD sales of the same Jan-Mar period were way down.

Robbie • on Sep 16, 2013 2:07 pm

i like how sites like blahgua are bringing content to users instead of them having to go find it. this will be how all content is distributed eventually.

Anonymous • on Sep 16, 2013 2:07 pm

What gets me is two words in the article He vows to “reduce content and operating costs” So that probably means even fewer movies in those red boxes. I’ve never used the service but to me my Netflix seems a lot more convenient. And VOD is the future; I watch everything online now except for the occasional Netflix DVD.

jack • on Sep 16, 2013 2:07 pm

Redbox rev’s rise and fall with BO. Four, Five months from now it will it will look like the current BO doldrums.

Probot • on Sep 16, 2013 2:07 pm

For most of the shit Hollywood produces i can wait a month or three… The new Star Trek is actually not worth even a dollar. I want $.40 back.

PSound • on Sep 16, 2013 2:07 pm

Physical media rental is in secular decline. It is no surprise that Redbox is being impacted.

There has been an exodus of more than $1.2 billion dollars from physical media rental in the last two years.

MaryAnn • on Sep 16, 2013 2:07 pm

Customer service might have something to do with it. I have never checked out a Redbox DVD, yet somehow I got email after email telling me to return the DVD I had supposedly checked out. Never did I get a response to my pleas to figure out what was happening, and to deal with the fact that they had my email address in error, and were holding me responsible for a dvd I never checked out. This sort of sloppiness cannot engender consumer confidence.

Certainly Netflix showed that it is possible to stumble through a transition from DVD to streaming media, but that it can also be achieved. Redbox certainly has the ability to pull off a similar feat, keeping the DVD business afloat while building a valuable streaming subscription business. The challenge is in such a fast paced industry, Netflix, Hulu, and Amazon have all been more aggressive in the streaming video business space, both with cutting distribution deals with strong content partners and more importantly, building a library of exclusive content.